Urgent budget repair and a range of structural reforms, including labour market reform, are critical to restoring Australia’s international competitiveness and future growth prospects, according to a new MCA Monograph by Professor Tony Makin of Griffith University.
In Australia’s Competitiveness: Reversing the slide, Professor Makin highlights the impact of loose fiscal policy on the marked deterioration of national competitiveness.
Overly expansionary fiscal settings of federal and state governments in the wake of the crisis, settings that have yet to be fully reversed, have contributed to the dollar’s strength and been a major source of our competitiveness problem.”
Professor Makin’s report is critical of the scale and timing of the stimulus package deployed during the global financial crisis (GFC), including the Building the Education Revolution program:
... the fiscal stimulus measures, most notably the BER program, failed to deliver as originally expected and left a loss of competitiveness as a lasting legacy.”
By contributing to the dollar’s strength and by creating pervasive policy uncertainty about how the large budget deficit it created was to be reversed, the fiscal response to the crisis weakened the economy, Professor Makin argues.